A comprehensive analysis of lending patterns at Pawnshops in Java (Indonesia), 1926–1932

Abstract

This research states that there is a process of involvement of colonial debt in Java, Indonesia in the typical economic characteristics of the loan and repayment cycle in the pawnshop system which is related to Eid al-Fitr, the Javanese months, and the climate of the planting season. This characteristic becomes an interesting study and very valuable knowledge for the development of socio-economic history in the area studied. The ability to understand the socio-economic conditions of society needs to be carried out in line with government programs to alleviate poverty. Therefore, understanding this article will help the government and society in choosing alternative solutions to their economic problems. This study focuses on the relationship between the lending cycle during Eid and the tendency to borrow during the planting climate. This research uses qualitative historical research methods. The practice of providing credit services using the pawnshop model was carried out based on the rules set by the colonial government. The process of borrowing and repaying loan funds is explained with the power of various analytical approaches. This problem will be explained using historical studies and other social sciences to enrich the explanation.

Keywords:

• Pawnshop
• eid
• javanese month
• jember
• planting climate

REVIEWING EDITOR:

• Samuel Adu-Gyamfi, History and Political Studies, Kwame Nkrumah University of Science and Technology College of Arts and Social Science, Kumasi, Ghana

SUBJECTS:

• History
• Religion
• Cultural Studies

Introduction

The beginning of the 20th-century credit history in Indonesia was marked by the emergence of several people’s credit institutions, including the State pawnshop (Batavia Landsdrukkerij, 1902). Pawnshop credit institutions (Tollens, 1855) play an essential role in the people’s socio-economic development. The urgent role of this institution has been expressed by several experts (Furnivall, 1934b; 1944; 3, 1928; Septina Alrianingrum, 2008; Wisnu, 2003). For instance, J.H. Boeke, in his article ‘Pandcrediet als kleincrediet’, which was published in Kolonial Studien in 1919, placed pawnshops in the prominent and most crucial position compared to Regional Banks, Lumbung Desa (Village Barns), and Village Banks (Boeke, 1919).

The background to the emergence of pawnshop credit institutions is due to the monetization process. Historically, the monetization process is closely related to the colonization in Southeast Asia, which resulted in a transformation of production mode from substance to capitalism. Additionally, plantation policies were more oriented toward the world market, changing the community’s financial conditions to be money-oriented (Nugroho, 2001). This transformation towards capitalism has created economic dualism, where the subsistence economic sector exists alongside the capitalist sector (Boeke & Burger, 1973).

A capital-intensive capitalist sector with a rural economy that relies on a limited agricultural economy. Based on rural social and economic relations. Villages are closed societies at the subsistence economic level, while capital owners and open capitalization networks control supra villages. There is freedom to be an economic actor; the money economy is the basic system of economic actors; The economic system operates under individual control even within a certain organizational network. A village economy is a subsistence economy, which is beyond the reach of the economy of money, markets, and transportation capital. The capitalist economy is supported by transportation networks, economic institutions (banking), markets, and the money economy (Boeke, 1953).

The colonial government implemented a monetization policy through land tax collection (Wijayati, 2001). Farmers no longer paid land tax with raw materials from their crops but paid it with cash. This policy impacted monetization in rural areas, implying that using cash as a payment became part of the people’s socio-economic life.

Monetization is identified or implied as a form of ‘all or nothing’ transformation. Whether something has been monetized or not, something can be partially monetized or is in the process of monetization. Conceptually it can be understood by asking whether monetization is described as a one-off event, or as an ongoing or gradual process. Monetization can involve relationships or objects between individuals corporate actors or social institutions such as people’s credit institutions or pawnshops. It can be considered as an index of the extent to which the object being monetized is a tangible and concrete object such as gold or agricultural products pledged in a pawnshop, or a more intangible and abstract concept, such as society or the economy (Hull, 2009). This concept implies the understanding that when pawnshop customers make a transaction, they must release their property as collateral to get cash.

The use of cash as a means of payment is becoming institutionalized in rural areas. As a result, the frequency of credit practices, both formal and non-formal, has increased. The introduction of the pawnshop system, including non-formal credit systems such as loan sharks in rural areas, has introduced a monetary culture system. These credit institutions are seen as agents of the capitalist mode of production (Nugroho, 2001).

Pawnshops emerged and developed along with the communities’ socio-economic conditions (Irsyam, 1993). Subsequently, when money is only owned by a small number of community members, while most other community members need it, there is a process of releasing their belongings to obtain cash. Pawnshops became the alternative that eased the burden on the population, similar to Wertheim’s statement that ‘the debts received from pawnshops were free whether they would be repaid by redeeming collateral or on the contrary’ (Wertheim, 1999).

The pawnshop credit institution drives all traditional economic activity. Therefore, its benefits are prominent, especially in transitioning from a barter to a money economy. The reason for the statement, as mentioned earlier, is that pawnshops enable people to convert their goods into cash, and connected with the hire purchase system, it mobilizes the capital and facilitates the transition from cash to a credit economy (Furnivall, 1934a).

The second issue was to seek a rural economic institution that could effectively distribute a suitable agricultural credit, or at least become a rival, as the role of moneylenders and raise capital from below. Hence, the Lumbung Desa (Village Barn) was established around 1900 throughout Java (Furnivall, 1934a) to provide loans to the population in the lean season for seeds at an interest rate of 25–50 percent, which was not expected (Sulistyawardhani and Rakyat, 200).

However, reports in the Memorie van Overgave between 1921 and 1930 show that the Lumbung Desa needed to function better, and most were disbanded because people needed money more than paddy loans (Arsip Nasional Republik Indonesia, 1978).

Meanwhile, the Village Bank was established in 1910 as a branch of the Afdeling Bank, but it could have worked better, similar to the report above. Most village banks were abolished, and the new ones were established elsewhere. The reason was that these village banks needed help to establish a relationship with the Afdeling Bank, which arranged credit for the Village Bank (Wolters, 1980). The different concepts applied to both banks needed more workable, as the Afdeling Bank was not the core for the Village Banks, which ran cooperatively (Boeke, 1930). Both credit institutions needed to be more reliable. Therefore, people looked for pawnshops for answers.

The first credit institution under the auspices of the Volkscredietwezen was Lumbung Desa (Village Barn). Initially, Lumbung Desa (Village Barn) was a credit institution put forward by the government. Lumbung Desa (Village Barn) developed rapidly during the first decades of the 20th century. Almost every place on the island of Java stands for Lumbung Desa (Village Barn). Outside Java, Lumbung Desa (Village Barn) is reported to be developing in several places such as Aceh, South Sulawesi, and West Sumatra. Within six years, the number of Lumbung Desa (Village Barn) Lumbungs grew rapidly, more than doubling. In 1905, it was recorded that there were 5,301 village barns. This figure then increased to 12,625 in 1911 (Rinardi, 2012). The rapid increase in village barns had a negative impact because many barns were built hastily and without proper planning. In the end, many barns were forced to close by the government because they were deemed not to provide benefits to rural communities.

The second institution is the Village Bank. This institution was developed by the colonial government more carefully. At the beginning of its development in 1907 there were only 328 village banks recorded. That number then increased to 906 in 1911, the interesting thing is that 904 of them were on the island of Java. The colonial government demanded strict conditions for the establishment of village banks. This action was taken so that the government could supervise village banks so that fraud does not occur. In several areas, Village Banks were closed by the colonial government due to fraud. Some of its assets were then merged with several existing village banks. The number of village banks increased greatly in the 1920s. Based on the government circular dated 11 October 1922 No. 2829/III, it is stated that the government will pay attention to village banks. If a village bank is proven not to be developing, it will be liquidated, whereas those with good development will expand their business (Rinardi, 2012).

The third credit institution is Afdelingbank which is also called Volksbank or People’s Bank, because it serves all levels of society, including farmers. In its development, its name became better known as the local bank because it acted as the sole bank in that area. Afdelingbank’s ability to distribute credit to its customers is very good because the number continues to increase every year, except during periods of economic depression. In the depression period, the amount of credit lent by Afdelingbank fell during the period 1930 to 1934. Afdelingbank experienced a setback in providing credit to the public. The lowest point occurred in 1934, at that time Afdelingbank was only able to distribute credit amounting to f. 15.46 million (Rinardi, 2012).

Credit institutions outside the Volkscredietwezen or private sector were credit lenders, and private pawnshops that were considered by the colonial government to be practicing rent-seeking. When the depression of 1929 occurred, the credit practices of loan sharks increased. Loan sharks offer credit services, even at high-interest rates, without complicated procedures. Even though the colonial government restricted the practices of loan sharks, their activities remained uncontrolled and even increased (Nugroho, 2001), one of the reasons why the colonial government opened its pawnshops.

In report J.R. Lette’s, related to the motto, dig a hole and cover the hole, means borrowing money to pay off a loan. What’s interesting about this process is that it ultimately ends up at the pawnshop. When all lending transactions made to banking institutions could no longer be carried out, indigenous people finally pawned their goods at pawnshops to obtain funds. The administration process is very easy (Lette, 1933).

J. Keers assesses that pawnshop administration is very easy compared to other credit institutions. Pawnshop managers base their down payments on the material value of the goods offered at the pawnshop and not on the collateral of the applicant, whether rich or poor. It does not matter whether the borrower is the owner of the goods; for those who hand over the goods, receive the loan money and a letter of pledge, and he who then entrusts the letter of pawn must pay the amount of the loan along with interest, can receive the goods back. There is no contact between the giver and recipient of credit and the recipient of credit also does not need to entrust the collateral themselves or redeem it, because the interpretation remains the same whether the person pledging is rich or poor.

J.C. Hartingsveldt, De Banken van Leening op Java, Colonial Studien, 1918. Explains that the comparison of interest rates at pawnshops is cheaper than the three other government credit institutions. Meanwhile, Boeke, Mentions that pawnshop credit is more trusted by indigenous people, there is no worry about borrowing money at a pawnshop because it only relies on collateral which is generally owned by indigenous people (Boeke, 1919).

Another advantage in pawnshops is that the pawnshop does not question what the money is used for and this is of course. This is in contrast to banking which must be detailed perhaps about the use of the money. Likewise with sanctions given relatively lightly, if it cannot be paid within a certain time. The most serious sanction is that the collateral held will be auctioned to cover the shortfall in loans that have been given.

So the profits of pawnshop companies when compared with bank financial institutions or other financial institutions are: (a) The relatively short time to earn money is in days. Also, this is because the procedure is not complicated; (b) The requirements are very simple, making it easier for consumers to fulfill it; (c) The pawnshop does not mind how the money is used for what purpose, so it is in accordance with the wishes of the customer.

Overall, credit was provided through the colonial government’s credit system, including during 1920–1930. Position People’s Credit System Judging from the amount of money lent, it has shifted to pawnshops. In 1920, the amount of money lent by the People’s Bank was f 39.46 million, the Village Bank was f 8.78 million, Lumbung Desa (Village Barn) was f 31.41 million, and the pawnshop credit institution was f 136.52 million. In the next five years, in 1925, Bank Rakyat f 52.38 million, Bank Desa f 33.77 million, Lumbung Desa f 17.95 million, and pawnshops f 166.25 million. In 1930, the People’s Bank f 72.44 million, the Village Bank f 44.39 million, and the pawnshop f 194.14 million (Creutzberg & Laanen van, 1987). Based on this data, it can be seen that the position of pawnshop credit institutions is increasingly attractive to indigenous people.

Finally, the prevalence of moneylenders in the community. These issues are the main reason the Dutch East Indies Government handled the pawnshop business. Although the government’s assistance could take lessons from Chinese moneylenders in running private pawnshops, they still considered their existence detrimental to the indigenous population.

The issue of people’s credit is fascinating, especially how to understand the pawnshop’s lending pattern dynamics. The historical study focused on collateral deposit and redemption in 1926–1932. This research aims to enrich the historiography, especially the socio-economic history in credit history. The authors hoped this research could contribute to the student’s future research.

Materials and methods

The references for this research were obtained from the National Library, the National Archives of the Republic of Indonesia (ANRI), the Indonesian Institute of Sciences (LIPI), the Central Pawnshop Library in Jakarta, the East Java Regional Archives in Surabaya. These sources include staatsblad, Verslag, besluit, Memorie van Overgave (MVO), onderzoek, statistiek, and regering almanak. Other sources include magazines, such as; Koloniale Studien, and supporting literature work such as; Fruin Th.A., Handleiding voor het Credietbedrijf der Algemeene Volkscredietbank, Uitgegeven door de Algemeene Volkscredietbank (1935). A very helpful reference in this research is Onderzoek naar de werking van het pandcrediet onder de Inlandsche bevolking door by Dr. J.R. Lette, Assistant Resident tijdelijk ter beschikking gesteld van den Directeur van Financien (January 1933).

This research utilized the historical method (Garraghan & Gilbert, 1957), which essentially includes the following procedures: the step of collecting written sources, both printed and handwritten. Additionally, testing the data’s truth or historical sources is completed by criticizing internal and external criticism. This procedure was taken to determine the credibility of historical sources that have been obtained in order for them to be scientifically accounted for. In addition, internal tests are carried out on the data obtained beforehand to avoid errors.

Subsequently, after going through the verification process through criticism, the drawn facts can be interpreted using a conceptual framework as an analytical tool and with a socio-economic approach where the data is organized with elaborations that can be academically accounted for. Historiography is the systematic compilation stage comprising a synthesis, causality, and chronology. Hence, this study also aims to reconstruct the past comprehensively, where facts or forces along with institutions that played a role in the past were extrapolated to produce an accurate analytical description. The methodological implications require a multidimensional approach (Kartodirdjo, 1992).

The use of sociology and economics (Smelser, 1990) in this study is to obtain accurate problem-solving in a multidimensional description, where its result can be academically accounted for. However, no restoration will bring a situation back to its original state.

Previous studies

Some previous papers that discuss the theme of pawnshops in the colonial period are found in articles published in Colonial Studien Magazine, including J.H. Boeke, J.C.van Hartingsveldt, and J. Keers’s work. Additionally, the State Pawnshop’s discussion in the Netherlands India was found in J.S. Furnivall’s Studies in the Economic and Social Development of the Netherlands East Indies, series 28, section IIIc, published in 1934. Published works by foreign authors were not found, nor were the local ones (Sunarso & Poerwoko, 1973; Hartingsveldt, 1918).

As stated in J.S. Furnivall’s work in State Pawnshop in Netherlands India (Rangoon: Burma Book LTD, 1934), which discussed the process of pawnshop development in the Dutch East Indies, it begins with a discussion of the pawnshop’s development before 1900, which continues with the experimental stage’s elaboration of state pawnshops in the span of 1900–1906, and the following years, which includes; showing the form of organization, administration, and social aspects briefly.

This work is informational or just a string of facts without any elaboration. There is an exciting review of Furnivall’s writing at the end. According to Furnivall (1934a), the pawnshop was intended to save the native population from the Chinese’s clutches of pawnbrokers. He compares pawnshops in the Dutch East Indies and Burma. In Burma, the state pawnshop was established to reduce the facility for stolen goods. Meanwhile, the annual report on the activities of the state pawnshop in the Dutch East Indies mentions losses caused by stolen goods. Chinese-run pawnshops in the Dutch East Indies were generally denounced as opium dens, which was not with Chinese pawnshops in Burma.

In a society with little experience in using money, pawnshops had an advantage over all other forms of credit. The Javanese, like the Burmese, always have in mind that if he or she can borrow money, he or she does not think about the burden of repayment (Vitalis, 1987). Pawnshops do not offer easy credit, as the borrower initiates the transaction by presenting the collateral to obtain immediate money.

As written in J Keers’ article entitled Het pandcrediet op Java, which argues that the vital role of the pawnshop was to provide the population with an opportunity to exchange goods for temporary money, which allows a particular good owner to relinquish their goods to meet their urgent needs. The pawn household goods were always at a fixed price, even if the price fell in a lean season (Keers, 1928).

Pawn credit was not similar to other forms of credit in general and was not considered in Europe to be a form of credit that only benefited people experiencing poverty. Van Hartingsveldt concluded this in his article De Banken van Leening op Java (Kolonial Studien, 1918). J.H. Boeke expressed a similar view in his article ‘Pandcrediet als kleincrediet’ (Boeke, 1919).

Pawnshops in Java were not as scandalous as they were perceived to be in Europe, according to Hartingsveldt. A wealthy person who did not have cash would bring his goods to a pawnshop to purchase something he desired. This was considered a mercantile calculation, similar to someone selling his shares to enter another economic transaction. A native sold his coat for a similar purpose, whereas in Europe, people pawned to fulfill their necessary needs. However, in Java, this was only sometimes the case.

According to Boeke, people tend to view pawn credit in Europe as pure emergency credit, as it t only arises in an urgent need for the benefit of the poorest strata of the urban population. The pawnshop in Europe could not shake off its pattern as an emergency credit institution that provided quick credit, which was often back-dated.

Tri Wahyuning M. Irsyam, in her work, Pegadaian and its Function in the Service of Providing Cash Needed by the Community (Jakarta: Master’s Thesis U.I., 1993), describes the beginning of the activities of the Bank van Leening or pawnshop were directed at providing loans to the weak economic class, to reduce the dependence of these communities on loan sharks who abused their weakness who needed urgent funds temporarily.

Most private and public financial institutions, especially cooperatives and banks, need help to solve the problems economically weak individuals face. The banks can only be utilized by those from the middle and upper classes, which means that the banks have yet to be able to reach out to customers from the lower economic classes. However, these banking institutions are bound by the bank’s and credit institutions’ rules of the game, where customers must have a particular (valuable) collateral to obtain credit, which is bound by bank administrative procedures that are (considered) formalistic, rigid, as it tends to be bureaucratic.

This generally causes the economically weak to turn to illegal non-banking and credit institutions to fulfill their urgent needs. They prefer to deal with illegal banks, intermediaries, loan sharks, and others because they can obtain loans in terms of collateral or the procedures that must be followed. Another alternative to obtain a loan is to use the pawnshop’s service.

In Java’s credit, Sumitro Djojohadikusumo (Sumitro Djojohadikusumo, 1989) pointed out that during the colonial period, these distinguished: (1) rice loans, for seed or to be eaten during the famine; repayable with rice also after the harvest twice as much as or one and a half times the amount of rice borrowed; (2) money loans, repayable after the harvest, with an additional a predetermined amount of rice; (3) money loans, repayable with work deemed appropriate to the loan; and (4) money loans that must be repaid with money, both the principal loan and interest.

These types of loans have significant consequences. If the debt becomes too large, the debtor can eliminate the principal and interest by (a) leasing part of the land to the debt collector for a certain period. After this period, the debt was considered paid off; (b) throughout Java and Madura, it was common for farmers to mortgage their land with the debtor’s right to cultivate it.

The landowner would get his land back after returning the money for the amount he had borrowed. The person lending the money against the land is usually entitled to at least one harvest.

If the person renting the land (in case a) or the pledgee (in case b) is wealthy, he may not need the land to support himself and his family. If this is the case, he will lease the land again or find someone willing to work it as a pemaro.

The latter is usually the actual landowner, who mortgages the land. As a result of the debt, the landowner becomes a pemaro cultivator of his land. The practices above may result in many agrarian populations losing their property, especially during the depression. These forms of land leasing and mortgaging as debt and credit relationships were particularly distressing in some areas.

Results and discussion

The debt involvement of the Javanese (Indonesian) population is understood as a free will to escape the lack of cash for living needs. Their situation is determined by external forces, shifts, internal changes, and the economic depression’s influence, which has the power to change life patterns.

Two main points need to be examined in studying pawnshops: the involvement of debt related to regional typology and the problem of impatience, the tendency to prioritize current income over future income. We will use the theories of Fruin and Fisher to address these issues.

According to Fruin, indigenous farming communities can be described as pre-capitalist. People produce for their own needs. Villagers are not economic people who rationally pursue welfare improvement. Since there is no continuous pursuit of welfare in the static nature of rural society, credit cannot improve welfare, nor can it stimulate production. Farmers do not fit the description of a ‘farmer’: individualistic, profit-seeking, rational in action, conscious of using capital to increase production, with a sharp separation between household and business. The conclusion is that credit is not primarily for production but for consumption. Fruin argues that:

Het crediet heeft dus een taak van nivelleering, die Eenerjids hierin bestaat dat in tijden van schaarschte en geldtekort in de meest dringende behoeften (levensonderhoud, grondbewerking) wordt voorzien met behulp van crediet, dat wordt terugbetaald in tijden dat de geldinkomsten ruimer vloeien, anderzins hierin, dat grootere gelduitgaven met behulp van crediet over een longer tijdvak worden verdeeld. (Fruin, 1935)

Based on the statement above, there is no distinction between productive and consumptive credit. Both household and business expenditures are similar. Therefore, the credit grant cannot be based on ‘production costs’ and profits (which cannot be determined), but on the amount of money the farmer receives and from other sources such as side income. From the money earned, the farmer must repay the debt (Cramer, 1929). Therefore, rural credit is socially justifiable and beneficial if it effectively fulfills equity function without charging too much (Boeke, 2015).

The pawnshop credit system does not assess whether a prospective debtor has an income. The most important thing is to have the goods to be pledged. At first glance, converting commodities into money and vice versa is the main task of pawnshops. It differs from the type of credit that concerns individuals in the general public credit system. On the contrary, pawn money is regarded as ‘delayed’ money, which can only be received by pawning the surplus previously accumulated in the form of objects or the level of prosperity.

The subjective element of lending by pawnshops clearly illustrates the credit nature of the business. Loans obtained from pawnbrokers (as with the Rural Credit system) are for cash and are not based on an urgent need. Pawnshop credit cannot be considered the last line of defense in the fight against poverty (Sumitro Djojohadikusumo, 1989). Savings are often held as objects or commodities, which can be exchanged for money at the pawnshop at any time or vice versa. Money can be exchanged for commodities. Thus, it could be connected to traditional saving, facilitating the indigenous people’s monetization.

J. Keers described the specifications of pawnshop credit that distinguish it from other forms of credit. First, this credit did not assess the personal circumstances of the person who would pawn the goods but rather the value of the goods. Second, pawnshops are for the public, not specifically for specific groups or individuals. Finally, pawnshops are passive (Laanen, 1988).

Unlike the Rural Credit System, people cannot be in arrears in the pawnshop system; if the time for pawning has expired or the pawned goods are not redeemed and cannot be used as collateral for further loans, the goods will automatically be auctioned off which may then be repurchased by the original owner.

Despite the differences in credit systems, Fruin’s concept is beneficial for analyzing the issue of debt involvement. He elaborated that the point for granting credit was classified into the types of agriculture by region, as shown in the following typology (Keers, 1928).

Based on Fruin’s typological classification, Java (Indonesia) includes areas that experience two harvests a year: food and merchandise, for instance, in areas where tobacco cultivation is interspersed with corn tobacco with paddy rice. In these areas, repayment must be made immediately after harvesting the merchandise because the rice or corn is intended for personal use.

The issue of debt involvement is caused not only by a region’s ecological conditions but also by a person’s psychological condition. Fisher pointed out ‘impatience’ as the dominant factor for people to enjoy money in advance. Additionally, he also stated a preference for current income over future income and considers ‘time preference’ or the level of impatience to be strongly influenced by the ‘time shape of the income stream’, where the form or shape taken by the income stream in time (Fruin, 1935).

Fisher’s formulation prioritizes income that can be enjoyed now over income that can only be enjoyed in the future. The formulation is more transparent and sharper than prioritizing present goods over future goods, essentially surplus produced and temporarily pledged in exchange for money.

In a review of asymmetric information theory, it is related to differences in information between one party and another in economic activities. Information asymmetry has a real effect on financial and financial decisions. Asymmetry theory states that parties related to a company do not have the same information regarding the company’s prospects and risks, certain parties have better information than other parties (Fisher, 1923).

The concept of transaction costs is necessary in understanding pawnshops; Coase’S article provides important insight into these costs. Based on the standard economic assumption that prices are a form of information, Coase suggested that ‘The most obvious cost is finding the relevant prices’. He went on to note that ‘The costs of negotiating and concluding separate contracts for each exchange transaction must also be taken into account’ (Wright, 2012). In understanding the components of transaction costs at pawnshops, it can be stated as follows. The conditions that must be met to be able to apply for a loan are to bring your identity card and the collateral to be pawned and sign the contract. Determination of costs, such as administration costs, and storage and maintenance costs are based on the value of the collateral. Repayment of loans or redemption of pawned goods by bringing ransom money as well as storage and maintenance costs. Auction, an auction is held if the customer cannot pay off the loan.

The discussion of this research is related to the character of the period studied. The credit institutions studied only emerged at the beginning of the 20th century, conditions are different from today. People at that time did not understand the pawnshop credit system, and only assessed its benefits for the need to provide urgent funds. This pawnshop credit institution takes care of the credit needs of native people. Unlike in Europe, this institution is considered unsuitable. Farmers are not interested in utilizing pawnshop credit services, which are considered to be able to solve their problems. European farmers were afraid, suspicious, or embarrassed due to lack of money and did not want to surrender their fate to pawnshops (Rindfleisch, 2019).

In the Dutch East Indies, indigenous people had no objections or concerns about utilizing credit lending services at pawnshops. Every offer of credit is welcomed without any suspicion or worry of being harmed. This is proven when the loan matures or is not redeemed, the collateral that has been deposited is left without hesitation to be auctioned off at the auction. This is also because the value of the collateral deposited shrinks or decreases and is even worthless because it is guaranteed for a long period. The amount of the loan in the form of money that is replaced by the collateral deposited does not have a bad effect, because there are collateral items available in their house. This condition is reminiscent of the economic situation at that time which was shifting from a barter economy to a money economy. They do not feel embarrassed regardless of social status, even if they are obliged to repay their debt at a later date (Hartingsveldt, 1918).

Pawnshop credit institutions are passive. The pawnshop manager bases the down payment on the material value of the goods offered in the pawnshop and not on the applicant’s guarantee, whether they are rich or poor. It does not matter whether the borrower is the owner of the goods; those who hand over the goods, receive the loan money and the letter of pledge, and he who then deposits the letter of pledge and must pay the loan amount with interest, can receive the goods back. There is no contact between the giver and recipient of the credit and the recipient of the credit also does not need to deposit the collateral himself or redeem it, because the interpretation remains the same whether a rich land owner or a poor daily wage earner is pawning his goods. The names on the pawn certificates are also of no value and in village research it has been proven that in most families who have many pawn letters in their homes, there are large differences in the names contained on the pawn letters. If a guarantee is deposited by the head of the family and reveals his name, the second guarantee is brought by his wife who, even though they are together with the pawnshop, uses his name, and the third guarantee is in the name of one of his children or relatives (Furnivall, 1934a).

Lending patterns at pawnshop Afdeeling Jember

Ecologically, the Jember Afdeeling region is a low and highland with several mountains, such as Argopura and Mount Raung (Keers, 1928). In the south, the soil is very fertile. However, in the southeast, it comprises the limestone hills of Watangan and Mandiku. The sedimentation process by the rivers that flow in this region also contributes to the fertility in some parts of the region, which is still found in swamp land (Dutch East Indies. Topografische Dienst, 1919).

The Jember Afdeeling region was very supportive of pawnshop activities. The ecological conditions of the region provide typology for the people’s debt involvement. Before being planted with tobacco, almost all rice fields were planted with rice on agricultural land in Afdeeling Jember (ANRI, 1823). The type of agriculture in Jember has two harvests a year. The harvest commodities are food and merchandise. Tobacco planting is interspersed with rice or corn crops. After the tobacco harvest, debt repayment or pawn installments must be made (Lette, 1933).

The people supporting pawnshop activities in the Jember Afdeeling region were generally indigenous people, Europeans, Chinese, and foreign Orientals. If it is related to their existence in the Jember Afdeeling region, this can be shown in Table 1.

Table 1. Population of Jember (1920–1930).

Years	Indigenous	Europeans	Chinese	Other eastern foreigners	Amount
1920	699,093	744	3,828	264	674,460
1930	920,068	2,555	9,463	705	932,791

Sources: Volkstelling 1930. 

Table 2. The amount of collateral deposited at Jember Pawnshop.

Jaar	A panden f (0.10–25)	B panden f (25–50)	C panden f 50–75	D panden f (75–100)	E panden bovenf (100)
1926	100,855	761	249	26	374
1927	124,584	812	221	16	476
1928	148,906	955	236	9	597
1929	176,151	1.060	249	18	680
1930	155,632	907	280	23	652
1931	135,946	–	–	–	–

Sources : Lette, J.R. (1933).

The indigenous population consists of Javanese and Madurese. The Madurese, known as hardworking and obedient to Islamic law, were often informed by J.R. Lette as tenacious pawnshop customers. Similarly, as early buyers, the Chinese pawn house was piloted in Jember in 1906 (Fruin, 1935). Based on the table above, it is impossible to provide a detailed elaboration of the population’s involvement in pawnshop activities since the pawn records do not include the criteria for the pawnbroker’s ethnicity. Frequently, the collateral was deposited on behalf of another person, where the original owner of the collateral was not identified. The pawnshop only knew that someone had a collateral item to pawn, which consisted of a certain amount of credit in a transaction (Verslag betreffende van den Gouvernements-Pandhuisdienst over het jaar, 1907).

The Javanese, Madurese, Chinese, Arabs, and Europeans’ involvement is seen in general where the indigenous people consisting of Madurese and Javanese ethnicities were the pawnshops’ customers in addition to being low-level employees, since the Chinese were managers, and the Europeans were Hoofd beheerder (Keers, 1928).

The economic conditions of the Jember Afdeeling region in the early 20th century supported pawnshop activities. The process of economic development of Jember, since the 19th century during the entry of tobacco plantations, led to a type of commercial economic system. The opening of tobacco plantations by Birnie in collaboration with Mathiesen and van Gennep in 1859 (Furnivall, 1934a) made Jember’s economy proliferate.

In addition to tobacco plantations, there were still coffee and rubber plantations, which local people owned. Tobacco, coffee, and rubber plantations contributed to the monetization process in the Jember region. Another influential factor is the existence of transportation facilities (railway) that connected Jember with the surrounding areas. This vehicle’s traffic activity enlivens the economy of the Jember community. In addition, it was supported by tiles, bricks, pottery, rattan, and bamboo weaving industries, the manufacture of carts and carriages in Jember, and the leather craft industry (saddlery and tanning) in Wirolegi (Vermeer, 1909).

Lending at Jember Pawnshop began in 1925–1932 by depositing collateral from prospective customers. The collateral deposited was differentiated based on its value into five groups: A between f 0.10 and f 25, B between f 25–50, C between f 50–75, D between f 75–100, and E above f 100. The amount of collateral in Jember pawnshops by classification is shown from 1926–1931 in the table below.

Credit transactions with collateral in pawnshops are closely related to the time before the planting season or when cultivating land, during Eid celebrations ceremonies (Wisnu, 2023), when there is a desire to buy livestock (Geertz and Mahasin, 1983), and during times of famine. The factors’ descriptions above are elaborated together because these factors cannot be separated into different descriptions. The phenomenon where some factors have similarities and differences between the two regions was investigated in Jember and South Malang (Sumberpetung). In Sumberpetung, credit transactions are conducted during Eid, rendengan, and marengan. However, there are also common features when pawnshop customers have to carry out credit transactions by pawning their goods as collateral and when making redemptions. These two activities are the focus of the research because there are patterns of pawnshop credit that can be seen as a unique and exciting concept to study and become a trend of the indigenous Javanese population.

Farmers often need funds to cultivate the land during the planting season, buy seeds, and pay for maintenance, including purchasing fertilizers, medicines, and other unexpected costs.

Jember farmers grow domestic crops as well as tobacco (Jonge, 1992). These two commodities are planted alternately. Rice, corn, cassava, and soybeans are often planted before and after the tobacco harvest. The Voor-Oogst and Na-Oogst types of tobacco are planted at the end of the rainy season and harvested at the beginning of the dry season (Nawiyanto, 1996).

Additionally, initial planting costs for tobacco crops are higher than for domestic crops. Tobacco crops overgone these procedures: (1) land preparation; (2) nursery; (3) land processing; (4) planting; and (5) plant maintenance, which includes land irrigation, plant mowing, soil fertilizing, pest eradication and fertilizing along with plant diseases (Padmo & Djatmiko, 1991). This initial work requires a large amount of funds. At the same time, more than the results of local crop rotations such as corn, soybean, rice, and cassava are needed to finance the tobacco pre-planting business. This condition forces farmers to engage in transactions with pawnshops.

Customers often do pawnbroking during Eid. The time before and especially after Eid. In 1926, when Eid fell on April 15, pawnshops were conducted that month before April 15. Similarly, on Eid, 4 April 1927. On Eid 23 March 1928, the time of pawnshop after Eid was in March. Eids of 13 March 1929, and 2 March 1930, were held in the same month (as seen in Table 3). Eid celebrations require money because you have to buy new clothes, pay for selamatan (tumpengan maleman), snacks for Eid guests, and expenses for anjangsana.

Table 3. Pawning and redemption months during Eid.

Years	Eid	Pawnshop Month	Redemption Month
1926	15 April	April	March
1927	4 April	April	March
1928	23 March	March	February
1929	13 March	March	February
1930	2 March	March	Early February

Sources: Lette, J.R. (1933). 

Collateral pawning during Eid occurs as follows. If Eid falls at the month’s end, the peak of deposits usually occurs in the following month. On the other hand, if Eid falls at the beginning of the month, then the peak of deposits in the same month. Finally, if Eid falls in the middle of the month, then deposits peak in the same month, but sometimes in the following month.

The above custom is not an absolute principle. Sometimes, pawnshop customers deposit collateral outside the months described. Eid is the peak of deposit activity, and a crowded situation can be seen then.

From 1926 to 1930, the pattern of pawnshop habits according to the above principles can be seen in Table 3. In 1926, Eid fell on April 15. Therefore, the deposits were made on the 1st–14th, the next three days off, and the 18th–30th deposits resumed.

In 1929, the pattern was nearly similar. 1927, when Eid fell on April 4, deposits were still made in April. Therefore, for Eid in 1928, which fell on April 23, deposits were made in March. The pattern for 1930 is similar to the one in 1927.

The time of marriage ceremonies and circumcisions were also times of deposit. These ceremonies are often associated with months that are seen as favorable and unfavorable. According to this principle, the population seen in the favorable months was falling during the harvest season. This can be seen in Table 4.

Table 4. The months of Java and Europe in 1925–1931.

Years	Month		Month		Month		Month
	Java	Europe	Java	Europe	Java	Europe	Java	Europe
1925	Mulud	20/9-19/10	Rejeb	26/1-24/2	Ruwah	25/2-25/3	Besar	23/6-21/7
1926		9/9-8/10		15/1-14/2		15/2-15/3		13/6-11/7
1927		29/8-27/9		5/1-3/2		4/2-4/3		2/6-1/7
1928		18/8-16/9		15/12-23/1		24/1-21/2		21/5-19/6
1929		7/8-5/9		14/12-12/1		13/1-10/2		11/5-8/6
1930		28/7-27/8		3/12-1/1		2/1-30/1		30/4-28/5
1931		17/7-15/8		23/11-22/12		23/12-20/1		20/4-18/5

Sources : Lette, J.R. (1933). 

The people of Jember (Padmo & Djatmiko, 1991) believe that the month of Maulud is an unfavorable month to celebrate many ceremonies, as it does not coincide with harvest time. If ceremonies must be held in Maulud (ANRI, 1871), pawnshop credit is often an alternative to procuring emergency funds. Rejeb (Vermeer, 1909), as associated with the tobacco harvest, is considered favorable, especially in 1928–1931. The month of Ruwah (Geertz, 1983) falls in a favorable month, and the month of Besar falls in a very favorable period (during the rice harvest). Other months that are considered auspicious are Syawal and Jumadilakir (Geertz, 1983).

The auspicious months are used for ceremonial ceremonies for those who have a wish. However, those who do not have agricultural land and activities in that field determine wedding days in these months, thus requiring a lot of financial costs and crops for the wedding ceremony.

However, this principle does not apply to all levels of the population. Low-income people are content to hold symbolic marriage ceremonies with modest consumption (selamatan jenang abang). As a result, many people organize ceremonies, such as marriages and circumcisions, by paying attention to the auspicious months, the need for quick money arises, and the decision is made to pawn collateral. In Jember, the Madurese people often practice this custom (Geertz, 1983).

In Arjasa (Jember region), it is believed that marriage or circumcision ceremonies are better held in the months of Ruwah and Selo (loose months). However, people prefer to wait for months with a significant income. In Wirolegi, it is believed that Rejeb, Besar, and Maulud are favorable months for ceremonies. Usually, these months are associated with the time of the rice harvest. The same is true in Mumbul and Mangli. In addition, there are the Garebeg Maulid and Garebeg Besar (Geertz, 1983) ceremonies, where these holidays are often noticed. Pawnshop activity during these months is bustling.

Collateral pawning also arises from the desire to buy livestock. This fact is based on the view of Jember farmers, who are generally Madurese. Madurese people keep livestock as if the animal is a family member. Men pay more attention to animals than to their wives. Theft or livestock injury is considered as serious as adultery and almost always leads to carok, murder, or persecution. Madurese men show excessive affection towards bulls, are seen as household companions, and are sometimes even treated like humans (Jonge, 1988; Nagazumi, 1974). Aside from the above views, the practical aspect is to help with farm work. However, livestock are often purchased to be traded again.

Madurese people in Jember habitually buy calves (Geertz, 1983) to resell them when they grow up. In addition to dealing with the People’s Credit Bank, they also utilize the services of pawnshops. The consumptive pawnshop credit type (Poerwoko, 1979; Thomas, 1983) has yet to prospect of developing productive businesses. That is why the choice often falls on the People’s Credit Bank (Masyarakat Indonesia, 1992).

In unfavorable economic conditions or a state of crisis (paceklik) related to the growing climate, this was the time when pawnshops emerged. From 1926 to 1929 in Jember, the famine season had little effect. This was due to several factors: (1) the existence of a very high tobacco income; (2) the significant corn harvest in rice fields in December-January, as well as moorland in February-March; (3) rice fields leased to tobacco plantations only needed to be planted with tobacco, while the other parts remained the property of the landowner to be planted with other crops.

This affected the amount of collateral pawned at pawnshops. There were a few reasons why people continued to pawn their goods in collateral groups A, B, and E during 1926–1929. First, they saw that their economic condition was still possible, primarily due to the previous period’s agricultural yields of rice, soybeans, corn, coffee, and tobacco. Additionally, the tobacco crop provided the enthusiasm to increase capital for planting costs. The tobacco crop was seen as unaffected by the crisis.

However, this condition changed when the economic crisis occurred in 1930–1931 when pawnshop activities declined. Some of the factors for the decline in pawnshops, especially for collateral A and B, since the 1930–1932 crisis in Jember pawnshops are: (1) harvests and food supplies were abundant, and due to low prices, these commodities were not sold or released; (2) the large number of small loans of several goods from Jember and Mangli; (3) employment opportunities were still quite broad, and wages from tobacco plantations had not decreased; (4) austerity, especially during ceremonies or selamatan; (5) the decline in the prices of various goods.

This situation harmed the people’s economy. The price fall hit all commodities, especially necessities such as clothing, food, and secondary goods. Meanwhile, wage laborers in the coffee and rubber plantations experienced the same thing. They suffered from a shortage of money due to a decrease in salaries, and some even received layoffs, feeling that they were in a situation where ‘food is cheap, money is scarce’, which was in 1932.

Wage laborers, generally Madurese, sought additional income in tobacco plantations as porters. In Mangli, they earned f 0.25 (previously f 0.30-f 0.35). The same was true for workers in the warehouse (Fruin, 1935). This income is considered sufficient for their daily needs. However, they are still in debt to pawnshops. They often have to borrow from the village bank. In Wirolegi and Arjasa, this situation is not experienced by tobacco farmers.

Collateral Pledgee C from Jember and Arjasa, during the famine, borrowed money from the Credit Bank with repayment of crops after the harvest. The annual report of the Jember People’s Credit Bank in 1930 reported that various household commodities were paid in cash to Chinese moneylenders. This situation was more prevalent in the south of Jember, where there was less money traffic than in the north (Basseling, 1919).

Due to reduced income, especially from the rice harvest, farmers no longer had the opportunity to invest their money in gold jewelry. The reduction in collateral was also due to rampant poverty. Not only did people no longer have any assets, they also could not borrow from pawnshops. They only had enough to fulfill their primary needs, especially food.

Conclusion

Dependence on borrowing money by the native population has a correlation between the need for money in advance for the population’s living needs. The peak lending process can be found in the presence of enabling conditions. These conditions are during the Eid al-Fitr holiday, when there is a need for Javanese ceremonial days, and are also determined by the planting climate. From the description of the two backgrounds, the Eid al-Fitr situation and Javanese ceremonial days indicate that many pawnshop customers come from Muslim communities. It can be seen that climate issues during planting are more general in nature and apply in various regions. The background patterns of holidays and ceremonial days look very constructive and become an interesting credit culture phenomenon. These patterns are not found in the behavior of other pawnshop customers in other Asian regions. This finding is a pattern that can be utilized and used as a basis for studying borrower behavior patterns in credit activities at other financial institutions.

Acknowledgment

Thank you to the Faculty of Social Sciences and Law, Surabaya State University for providing support for this research.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

W. Wisnu

W. Wisnu is a doctor of History at the Faculty of Social and Political Sciences, History Education Study Program, Universitas Negeri Surabaya, Indonesia. His area of expertise is socio-economic history. His research includes socio-economic history, historiography, local history, and social and cultural history, especially in the Java region, of Indonesia.

N. Nawiyanto

N. Nawiyanto is a professor in the Faculty of Humanities, Department of History at Universitas Jember, Indonesia. He obtained PhD from the Australian National University. He specializes in the economic and environmental history of Indonesia. His research interests include environmental change, nature conservation, environmental movements, and river historiography, particularly in Indonesia’s island of Java from the Dutch colonial to the early independence periods.

W. Wasino

W. Wasino is a profesor at the History Department, Faculty of Social Sciences, Universitas Negeri Semarang. He graduated from Gadjah Mada University with a research focus on Social and Economic History.

Muhammad Turhan Yani

Muhammad Turhan Yani is a professor at the Universitas Negeri Surabaya, Indonesia. His research topic includes the sociology of religion, social humanities, and multicultural education.